| LONG-TERM DEBT | 5. LONG-TERM DEBT Long-term debt, including the current portion, consisted of the following at June 30, 2019 and December 31, 2018 (in thousands): ā ā ā ā ā ā ā ā ā ā June 30, ā December 31, ā 2019 2018 Credit agreement ā $ 40,000 ā $ - 1.25% Convertible Senior Notes due 2020 ā ā 562,075 ā ā 562,075 5.75% Senior Notes due 2021 ā ā 873,609 ā ā 873,609 6.25% Senior Notes due 2023 ā ā 408,296 ā ā 408,296 6.625% Senior Notes due 2026 ā ā 1,000,000 ā ā 1,000,000 Total principal ā ā 2,883,980 ā ā 2,843,980 Unamortized debt discounts and premiums ā ā (17,550) ā ā (28,994) Unamortized debt issuance costs on notes ā ā (19,850) ā ā (22,665) Total debt ā ā 2,846,580 ā ā 2,792,321 Less current portion of long-term debt ā ā (542,716) ā ā - Total long-term debt ā $ 2,303,864 ā $ 2,792,321 ā Credit Agreement Whiting Oil and Gas, the Companyās wholly owned subsidiary, has a credit agreement with a syndicate of banks that as of June 30, 2019 had a borrowing base of $2.25 billion and aggregate commitments of $1.75 billion. As of June 30, 2019, the Company had $1.7 billion of available borrowing capacity under the credit agreement, which was net of $40 million of borrowings outstanding and $2 million in letters of credit outstanding. The borrowing base under the credit agreement is determined at the discretion of the lenders, based on the collateral value of the Companyās proved reserves that have been mortgaged to such lenders, and is subject to regular redeterminations on May 1 and November 1 of each year, as well as special redeterminations described in the credit agreement, in each case which may reduce the amount of the borrowing base. Upon a redetermination of the borrowing base, either on a periodic or special redetermination date, if borrowings in excess of the revised borrowing capacity were outstanding, the Company could be forced to immediately repay a portion of its debt outstanding under the credit agreement. A portion of the revolving credit facility in an aggregate amount not to exceed $50 million may be used to issue letters of credit for the account of Whiting Oil and Gas or other designated subsidiaries of the Company. As of June 30, 2019, $48 million was available for additional letters of credit under the agreement. The credit agreement provides for interest only payments until maturity, when the credit agreement expires and all outstanding borrowings are due. The credit agreement matures on April 12, 2023, provided that if at any time and for so long as any senior notes (other than the 2020 Convertible Senior Notes) have a maturity date prior to 91 days after April 12, 2023, the maturity date shall be the date that is 91 days prior to the maturity of such senior notes. Interest under the credit agreement accrues at the Companyās option at either (i) a base rate for a base rate loan plus the margin in the table below, where the base rate is defined as the greatest of the prime rate, the federal funds rate plus 0.5% per annum, or an adjusted LIBOR rate plus 1.0% per annum, or (ii) an adjusted LIBOR rate for a Eurodollar loan plus the margin in the table below. Additionally, the Company incurs commitment fees as set forth in the table below on the unused portion of the aggregate commitments of the lenders under the credit agreement, which are included as a component of interest expense. At June 30, 2019, the weighted average interest rate on the outstanding principal balance under the credit agreement was 4.4%. ā ā ā ā ā ā ā ā ā ā Applicable ā Applicable ā ā ā ā Margin for Base ā Margin for ā Commitment Ratio of Outstanding Borrowings to Borrowing Base Rate Loans Eurodollar Loans Fee Less than 0.25 to 1.0 ā 0.50% ā 1.50% ā 0.375% Greater than or equal to 0.25 to 1.0 but less than 0.50 to 1.0 ā 0.75% ā 1.75% ā 0.375% Greater than or equal to 0.50 to 1.0 but less than 0.75 to 1.0 ā 1.00% ā 2.00% ā 0.50% Greater than or equal to 0.75 to 1.0 but less than 0.90 to 1.0 ā 1.25% ā 2.25% ā 0.50% Greater than or equal to 0.90 to 1.0 ā 1.50% ā 2.50% ā 0.50% ā The credit agreement contains restrictive covenants that may limit the Companyās ability to, among other things, incur additional indebtedness, sell assets, make loans to others, make investments, enter into mergers, enter into hedging contracts, incur liens and engage in certain other transactions without the prior consent of its lenders. Except for limited exceptions, the credit agreement also restricts the Companyās ability to make any dividend payments or distributions on its common stock. These restrictions apply to all of the Companyās restricted subsidiaries (as defined in the credit agreement). As of June 30, 2019, there were no retained earnings free from restrictions. The credit agreement requires the Company, as of the last day of any quarter, to maintain the following ratios (as defined in the credit agreement): (i) a consolidated current assets to consolidated current liabilities ratio (which includes an add back of the available borrowing capacity under the credit agreement) of not less than 1.0 to 1.0 and (ii) a total debt to last four quartersā EBITDAX ratio of not greater than 4.0 to 1.0. The Company was in compliance with its covenants under the credit agreement as of June 30, 2019. The obligations of Whiting Oil and Gas under the credit agreement are collateralized by a first lien on substantially all of Whiting Oil and Gasā and Whiting Resource Corporationās properties. The Company has guaranteed the obligations of Whiting Oil and Gas under the credit agreement and has pledged the stock of its subsidiaries as security for its guarantee. Senior Notes and Convertible Senior Notes The following table summarizes the material terms of the Companyās senior notes and convertible senior notes outstanding at June 30, 2019: ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā 2020 ā ā ā ā ā Convertible ā 2021 ā 2023 ā 2026 ā ā Senior Notes ā Senior Notes ā Senior Notes ā Senior Notes Outstanding principal (in thousands) ā $ 562,075 ā $ 873,609 ā $ 408,296 ā $ 1,000,000 Interest rate ā 1.25% ā 5.75% ā 6.25% ā 6.625% Maturity date ā Apr 1, 2020 ā Mar 15, 2021 ā Apr 1, 2023 ā Jan 15, 2026 Interest payment dates ā Apr 1, Oct 1 ā Mar 15, Sep 15 ā Apr 1, Oct 1 ā Jan 15, Jul 15 Make-whole redemption date (1) ā N/A (2) ā Dec 15, 2020 ā Jan 1, 2023 ā Oct 15, 2025 (1) On or after these dates, the Company may redeem the applicable series of notes, in whole or in part, at a redemption price equal to 100% of the principal amount redeemed, together with accrued and unpaid interest up to the redemption date. At any time prior to these dates, the Company may redeem the notes at a redemption price that includes an applicable premium as defined in the indentures to such notes. (2) The indenture governing the 1.25% Convertible Senior Notes due 2020 does not allow for optional redemption by the Company prior to the maturity date. Senior Notes In March 2015, the Company issued at par $750 million of 6.25% Senior Notes due April 2023 (the ā2023 Senior Notesā). In December 2017, the Company issued at par $1.0 billion of 6.625% Senior Notes due January 2026 (the ā2026 Senior Notesā and together with the 2021 Senior Notes and the 2023 Senior Notes, the āSenior Notesā). The Company used the net proceeds from this offering to redeem in January 2018 all of the then outstanding 2019 Senior Notes. Refer to āRedemption of 2019 Senior Notesā below for more information on the redemption of the 2019 Senior Notes. Exchange of Senior Notes for Convertible Notes. Redemption of 2019 Senior Notes. 2020 Convertible Senior Notes For the remaining $562 million aggregate principal amount of 2020 Convertible Senior Notes outstanding as of June 30, 2019, the Company has the option to settle conversions of these notes with cash, shares of common stock or a combination of cash and common stock at its election. The Companyās intent is to settle the principal amount of the 2020 Convertible Senior Notes in cash upon conversion. Prior to January 1, 2020, the 2020 Convertible Senior Notes will be convertible at the holderās option only under the following circumstances: (i) during any calendar quarter commencing after the calendar quarter ending on June 30, 2015 (and only during such calendar quarter), if the last reported sale price of the Companyās common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (ii) during the five business day period after any five consecutive trading day period (the āmeasurement periodā) in which the trading price per $1,000 principal amount of the 2020 Convertible Senior Notes for each trading day of the measurement period is less than 98% of the product of the last reported sale price of the Companyās common stock and the conversion rate on each such trading day; or (iii) upon the occurrence of specified corporate events. On or after January 1, 2020, the 2020 Convertible Senior Notes will be convertible at any time until the second scheduled trading day immediately preceding the April 1, 2020 maturity date of the notes. The notes will be convertible at a current conversion rate of 6.4102 shares of Whitingās common stock per $1,000 principal amount of the notes, which is equivalent to a current conversion price of approximately $156.00. The conversion rate will be subject to adjustment in some events. In addition, following certain corporate events that occur prior to the maturity date, the Company will increase, in certain circumstances, the conversion rate for a holder who elects to convert its 2020 Convertible Senior Notes in connection with such corporate event. As of June 30, 2019, none of the contingent conditions allowing holders of the 2020 Convertible Senior Notes to convert these notes had been met. Upon issuance, the Company separately accounted for the liability and equity components of the 2020 Convertible Senior Notes. The liability component was recorded at the estimated fair value of a similar debt instrument without the conversion feature. The difference between the principal amount of the 2020 Convertible Senior Notes and the estimated fair value of the liability component was recorded as a debt discount and is being amortized to interest expense over the term of the notes using the effective interest method, with an effective interest rate of 5.6% per annum. The fair value of the liability component of the 2020 Convertible Senior Notes as of the issuance date was estimated at $1.0 billion, resulting in a debt discount at inception of $238 million. The equity component, representing the value of the conversion option, was computed by deducting the fair value of the liability component from the initial proceeds of the 2020 Convertible Senior Notes issuance. This equity component was recorded, net of deferred taxes and issuance costs, in additional paid-in capital within shareholdersā equity, and will not be remeasured as long as it continues to meet the conditions for equity classification. Transaction costs related to the 2020 Convertible Senior Notes issuance were allocated to the liability and equity components based on their relative fair values. Issuance costs attributable to the liability component were recorded as a reduction to the carrying value of long-term debt on the consolidated balance sheet and are being amortized to interest expense over the term of the notes using the effective interest method. Issuance costs attributable to the equity component were recorded as a charge to additional paid-in capital within shareholdersā equity. The 2020 Convertible Senior Notes consisted of the following at June 30, 2019 and December 31, 2018 (in thousands): ā ā ā ā ā ā ā ā ā June 30, ā December 31, ā 2019 2018 Liability component ā ā ā ā ā ā Principal ā $ 562,075 ā $ 562,075 Less: unamortized note discount ā ā (17,950) ā ā (29,504) Less: unamortized debt issuance costs ā ā (1,409) ā ā (2,340) Net carrying value ā $ 542,716 ā $ 530,231 Equity component (1) ā $ 136,522 ā $ 136,522 (1) Recorded in additional paid-in capital, net of $5 million of issuance costs and $50 million of deferred taxes. The following table presents the interest expense recognized on the 2020 Convertible Senior Notes related to the stated interest rate and amortization of the debt discount for the three and six months ended June 30, 2019 and 2018 (in thousands): ā ā ā ā ā ā ā ā ā ā ā ā ā ā ā Three Months Ended ā Six Months Ended ā ā June 30, ā June 30, ā ā 2019 ā 2018 ā 2019 ā 2018 Interest expense on 2020 Convertible Senior Notes ā $ 7,574 ā $ 7,258 ā $ 15,068 ā $ 14,439 ā Security and Guarantees The Senior Notes and the 2020 Convertible Senior Notes are unsecured obligations of Whiting Petroleum Corporation and these unsecured obligations are subordinated to all of the Companyās secured indebtedness, which consists of Whiting Oil and Gasā credit agreement. The Companyās obligations under the Senior Notes and the 2020 Convertible Senior Notes are guaranteed by the Companyās 100%-owned subsidiaries, Whiting Oil and Gas, Whiting US Holding Company, Whiting Canadian Holding Company ULC and Whiting Resources Corporation (the āGuarantorsā). These guarantees are full and unconditional and joint and several among the Guarantors. Any subsidiaries other than these Guarantors are minor subsidiaries as defined by Rule 3-10(h)(6) of Regulation S-X of the SEC. Whiting Petroleum Corporation has no assets or operations independent of this debt and its investments in its consolidated subsidiaries. |
